In our January 15, 2015, post, linked here, we noted the decision in Lasco Inc. v. Inman Construction Corp., et al., 2015 WL 129024 (Tenn. App. 2015), in which the Tennessee Court of Appeals reversed the trial court and upheld an arbitrator’s attorneys’ fee award. The court found that, while the contract at issue did not explicitly provide for the award of attorneys’ fees, the parties incorporated the AAA’s Construction Industry Rules into their agreement – particularly Rule 45, which authorizes arbitrators to include an attorneys’ fees in an award when both parties request attorneys’ fees. Because both parties had requested attorneys’ fees, the court held that the arbitrator had not exceeded his authority in awarding attorneys’ fees to the prevailing party.

Recently, in City of Chesterfield v. Frederich Constr., Inc., 2015 WL 1814471 (Mo. Ct. App. 2015), the Missouri Court of Appeals held similarly. The contracts at issue provided that all disputes were to be resolved under the AAA’s Construction Industry Rules, but the contracts did not contain explicit attorneys’ fee provisions. There was also no statutory authority for an attorneys’ fee award. The arbitrators noted those points in their final award, but the panel nevertheless awarded fees against the City of Chesterfield under Rule 45 of the AAA’s Construction Industry Rules. Despite the City’s urging that its prior requests for attorneys’ fees were merely “boilerplate” requests, the Court of Appeals found that both parties had indeed requested attorneys’ fees. Therefore, the court held that the panel’s award of fees was proper.

In Lasco Inc. v. Inman Construction Corp., et al., 2015 WL 129024 (Tenn. App. 2015), the trial court had vacated an arbitrator’s award of attorneys’ fees in favor of the defendant general contractor and its surety, concluding that the award exceeded the arbitrator’s power. On January 9, 2015, the Tennessee Court of Appeals reversed the trial court and upheld the arbitrator’s attorneys’ fee award.

The dispute involved non-payment claims by a subcontractor, Lasco Inc., against the general contractor, Inman Construction Corp., and Inman’s surety, Travelers Casualty and Surety Company of America. After a four-day arbitration hearing, the arbitrator denied Lasco’s payment claim and awarded Inman $162,333.44 in attorneys’ fees, plus costs of $12,112.20, which represented the portion of the arbitration fees and expenses incurred by Inman that exceeded the American Arbitration Association’s previous apportionment.

Inman moved to confirm the award, and Lasco moved to vacate the attorneys’ fee award. Lasco claimed that the arbitrator exceeded his authority because the parties’ contract did not authorize an award of attorneys’ fees. The trial court agreed with Lasco and vacated the award. Inman appealed.

The Court of Appeals did not dispute that the contract at issue did not expressly provide for an award of attorneys’ fees. But, as Inman argued, the parties’ contract incorporated the AAA’s Construction Industry Rules as the rules governing an arbitration under the contract. Rule 45(d)(ii) provides that an arbitration may “include . . . an award of attorneys’ fees if all parties have requested such an award or it is authorized by law or their arbitration agreement.” Therefore, the Court of Appeals found that, by virtue of the parties’ incorporation of the AAA’s Construction Industry Rules into their agreement, the parties’ contract did provide for an award of attorneys’ fees if both parties’ requested such an award.

Inman requested an attorneys’ fee award, and so did Lasco. In fact, Lasco’s attorneys’ fee request was based in part on Rule 45. Accordingly, the Court of Appeals ruled that the arbitrator had not exceeded his authority by awarding attorneys’ fees to Inman.

Floods do all sorts of damage. One aspect of damage often overlooked is when the flood removes property from one property owner’s land and deposits it on another’s land. Depending on where your property is located and the severity of the flood event, the debris on the policyholder’s property can be extensive and expensive to clean up. The question naturally becomes, is this a covered loss under the Standard Flood Insurance Policy?

A quick review of the policy would suggest yes. However, case law shows that is not always the situation. The Standard Flood Insurance Policy states “[w]e will pay the expense to remove non-owned debris that is on or in insured property and debris of insured property anywhere.” The policy delineates between debris that originated on the policyholder’s property and debris that does not. There is no question that the removal of debris owned by the policyholder is covered anywhere. The issue here is when will the policy cover the removal of non-owned debris and it was addressed recently by the 3rd Circuit Court of Appeals in Torre v. Liberty Mutual Fire Ins. Company.1

In Torre, the plaintiffs sought coverage for the removal of non-owned debris deposited on their property during Superstorm Sandy. The Court ruled that the land upon which a policyholder’s structures are built is not considered insured property under the policy. The court stated:

In sum, the SFIP provides coverage for certain structures and other items of property but not for an entire parcel of land. The entire parcel of land thus cannot constitute “insured property” because it is not insured by the SFIP at all. And because the entire parcel of land does not constitute “insured property,” the provision of the SFIP requiring Liberty to pay for the removal of non-owned debris that is “on or in insured property” does not apply to the expenses the Torres incurred in removing non-owned debris from their land outside their home.

Thus, unless non-owned debris is in or on the structure, the SFIP will not cover it. There is, however, a more concerning note in this case regarding government waste and the vexatious litigation strategies employed by the flood carriers and their attorneys. The total amount in dispute in the Torre matter was $15,520. In my experience, I do not believe there is any way that a matter can proceed through motions for summary judgment and then a federal appeal for legal costs of less than $15,000. More likely , the flood carrier spent far more to defend this case than it would have cost them to settle it. I bet if the flood carrier’s legal costs were not being covered by federal treasury (taxpayers), the matter would have been resolved long before getting to this point.

The construction industry is nothing if not innovative. Dutch researchers have found a way to mix bacteria into concrete in order to repair cracks. The bacteria remain dormant until water (entering through a crack) dissolve a plastic encapsulation, whereupon the bacteria grow and consume a calcium lactate additive. This growth cycle produces limestone which closes the cracks.

Obviously more testing is needed; there would likely be a limit on the size of cracks which could be “healed” in this way, and there would likely be a difference in the strength of a healed crack vs. a traditionally-repaired crack, but it holds promise for addressing smaller cracks that allow water intrusion and slow deterioration.

Fascinating stuff. From a legal perspective, these types of innovations touch on more than just the construction field – patent law, environmental law, and general liability issues are all potentially implicated.

But now Dr. Bruce Banner has hope for finding a bride. (+5 for getting that reference.)

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